Final Thoughts
Final Thoughts
Written by John Packard
September 5, 2013
I read two articles recently regarding the impact of the devaluation of the India rupee against the U.S. dollar. One article (IHS Global Insight) discussed the metallurgical coal markets as the Indian steel mills have pulled back from the market as their costs spiral out of control. According to IHS Global the Indian currency lost 17 percent of its value in the South African coal markets during the month of August alone.
The Economic Times out of India reported JSW Steel (Jindal) plans on exporting 3 million metric tons (3.3 million net tons) during this fiscal year. The reason is tied to the drop in the value of the rupee against the dollar and how that has made Indian produced steel less expensive in the world market. Last year, JSW exported 1.9 million tons last year (2.09 million net tons). The article mentioned the U.S. as one of the target markets.
The Economic Times article also mentioned that JSW Steel is a bidder for the Stemcor iron ore assets in India. Bids are to be submitted by September 10th.
More trade cases were filed in the past 24 hours. This time it was for “dumping” rebar from Turkey and our NAFTA trade partner – Mexico. There were also countervailing duty case filed against Turkey. We put a press release from the AIIS about the cases on our existing website for anyone who is interested.
As always we appreciate your loyalty and your business as both keep us going.
John Packard
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Final Thoughts
Steel equities and steel futures fell hard after news broke earlier this week that the US and Mexico might reach an agreement that would result in the 50% Section 232 tariff coming off Mexican steel. The sharp declines didn’t make much sense, especially if, as some reports indicate, Mexico might agree to a fixed quota. They didn't make sense even if steel flows between the US and Mexico remain unchanged.
Final Thoughts
Even before the news about Mexico, I didn’t want to overstate the magnitude of the change in momentum. As far as we could tell, there hadn’t been a frenzy of new ordering following President Trump’s announcement of 50% Section 232 tariffs. But higher tariffs had unquestionably raised prices for imports, which typically provide the floor for domestic pricing. We’d heard, for example, that prices below $800 per short ton for hot-rolled (HR) coil were gone from the domestic market – even for larger buyers.
Final Thoughts
I want to draw your attention to SMU’s monthly scrap market survey. It’s a premium feature that complements our long-running steel market survey. We’ve been running our scrap survey since late January. And over just that short time, it’s become a valuable way not only for us to assess where scrap prices might go but also to quantify some of the “fuzzy” indicators - like sentiment and flows - that help to put the price in context.
Final Thoughts
I think there is an obvious case for sheet and plate prices going higher from here. That’s because, on a very basic level, the floor for flat-rolled steel prices, which is typically provided by imports, is now significantly higher than it was a week ago.
Final Thoughts
We're about to hit 50% Section 232 steel tariffs. What could happen?